Zero Balance Accounts of Government Entities Will Be Closed – Business
ISLAMABAD: The federal government has ordered all commercial banks to immediately close accounts of public sector entities with zero balances.
The directive, communicated through the State Bank of Pakistan (SBP), followed a related May 18 memorandum in which the government directed all ministries, divisions, governments of four provinces, Azad Kashmir and Gilgit -Baltistan and their public sector enterprises to immediately surrender their working capital and retained surplus funds for placement in a federation single treasury account.
All of these entities, including the clerks of the Supreme Court and High Courts, the Senate, the National Assembly and the Military Accounts, were ordered last month by the Ministry of Finance that all notifications since July 2003 permitting these entities to retain excess funds and working capital in their own accounts had been “withdrawn with immediate effect”.
“In addition, the approval given to any public sector entity with respect to maintaining work balance is also withdrawn,” the May 18 notification reads.
In a new notification to banks published on June 11, the Ministry of Finance wished that the process started in 2020 following the adoption of the Public Finance Management Act 2019 would also set up a procedure in consultation with the SBP and international bodies. loan.
In an effort to consolidate federal government cash balances, “the finance division collected information on all accounts maintained by federal government entities through the SBP. After analysis of this information, it has been established that thousands of zero balance accounts (ZBA) in regular commercial banks are inoperative and that there are zero balance accounts”.
The Minister of Finance said that Article 78 of the Constitution requires that all income, loan receipts and all other funds received by or on behalf of the Government of Pakistan either form part of the Federal Consolidated Fund (FCF) or of the federation’s public account (FAP).
The FCF and PAF cash balances are kept in central account no. 1 (non-food) at the SBP.
Under the Public Financial Management (PFM) Act 2019, the operations of the FCF and PAF are devolved to the Finance Division. The law also required, under Article 23(2), that no authority transfer public funds for the purpose of investment or deposit from one government account to another bank account without government approval. federal.
Subsequently, the government also notified Treasury Single Account and Cash Management Policy 2019-29 and Treasury Single Account and Cash Management Rules 2020 under which “no government office shall open, operate or maintain a bank account for any purpose except in accordance with the Public Financial Management Act”. and that “any approval granted by the Finance Division prior to the entry into force of these rules, for the opening of bank accounts in regular banks by government offices shall be revoked upon the entry into force of these rules” .
Under these rules, accounts already opened were to be closed and balances, if any, transferred to the Federal Consolidated Fund.
Section 45 of the Public Financial Management Act “shall prevail over all other laws and any law inconsistent with this Act”, while Rule 4(4) of the Cash Management and Single Account Rules of the Treasury 2020 states that no authority shall transfer public funds in violation of subsection (2) of section 23.
Under various notifications, working capital and investment of surplus funds belonging to PSCs and local and self-governing bodies could be deposited with any public or private bank for their operations subject to a set of conditions and criteria. PSEs were also allowed to invest their excess funds in non-government securities, term finance certificates and stocks up to 20% of total funds under management.
Posted in Dawn, June 17, 2022